Talk About my Understanding of ERP (1)


ERP is a management system that serves the supply chain of an enterprise. Because. the my recent work project is related to ERP, I would like to talk about the author's understanding of ERP.

1. Supply chain and ERP

When it comes to ERP, it must be the supply chain. After all, ERP is to serve the supply chain of the enterprise, so if we want to talk about ERP, we must talk about the supply chain first.

Supply chain refers to the product and service network composed of suppliers, manufacturers, distributors and final consumers. The composition of supply chain varies in different industries. Different enterprises play different roles in this network and have different influence on the supply chain.

The scope of the supply chain that ERP system can manage now should be the enterprise itself and its upstream and downstream enterprises in the supply and demand relationship, starting from enterprise procurement and ending at enterprise customers.

Since ERP can be traced back to MRP Ⅱ and MRP, its original management demand is the management of physical product warehouse and order, which is gradually expanded and enriched later. Precisely because its source is the management of the sales and production process of physical products, it can be seen that ERP system plays a role in manufacturing enterprises (such as machinery and household appliance manufacturing enterprises) and circulation enterprises (such as chain stores).

It is also doomed that the ERP system itself mainly focuses on the production and operation features of the enterprise, rather than the work of marketing and R & D.

2. Implementation of ERP system

The implementation of an ERP system in an enterprise needs to combine the following aspects:

  • Characteristics of the industry in which the enterprise is located
  • Position and role of enterprise in supply chain
  • Current actual situation of the enterprise

If any enterprise wants to implement it, it needs to consider the self development / procurement of ERP system and its implementation steps and processes in the enterprise from these three points.

1. Industry characteristics: determine the resources of ERP management

Whether it is self-development or procurement, enterprises need to consider industry characteristics when implementing ERP systems.

The products, services and methods provided by enterprises vary according to their industries, and the value generated by enterprises will be consumed by customers in different forms, which determines the characteristics of enterprise production and operation and will directly affect the features, modules and business of ERP.

In the machinery manufacturing industry, the company mainly assembles various materials through various processes in the production process, so the bill of materials and production management are particularly important.

In the petrochemical industry, there are material changes in the production process. Generally speaking, there are fewer types of procurement content and fewer types of output, so the perspectives of inventory and budget are more prominent.

In the logistics industry, enterprise operation has nothing to do with production. At this time, the resources that enterprises need to manage are their transportation capacity, including transportation equipment and transportation personnel.

In the service industry, such as tourism, catering, etc., there is no concept of physical inventory such as procurement and inventory in the traditional sense. It is necessary to abstract the supply and demand capabilities of enterprises from the beginning, and then manage them.

Because of these differences, existing ERP SaaS service providers often provide solutions for a certain industry, and enterprises are more inclined to purchase industry-specific ERP systems.

The final reflection of these industry characteristics into ERP is the particularity of its modules and business processes. In the implementation of ERP, the construction of each module determines the ERP resources it needs.

2. Position and role: determine the scope of ERP

The composition of the supply chain that enterprises need to cover in the implementation of ERP is determined by the position and role of enterprises in the supply chain.

In the supply chain network, all different types of members restrict and interact with each other. However, due to the different number and substitutability of different types of members in different industries, it is strong or weak in the supply chain for a single enterprise, and its position and role in the supply chain determine its bargaining power and influence.

Taking the home appliance industry as an example, the above image is from the book "Supply chain management". The author enriches its home appliance distribution channels on the basis of the image in the book. In the household appliance industry, brand manufacturers are the core as a whole. Brand manufacturers can directly manage franchise stores as enterprise resources and take them as a part of ERP system.

Because of the different positions of enterprises in the supply chain, the suppliers, sales clients and key sales organizations that enterprises need to evaluate and manage in the supply chain will be different, which determines the scope of ERP and the rate of obtaining terminal sales feedback.

3. Actual situation: determine the stage of ERP management

ERP implementation is a phased process, determined by the current reality of the business.

How much value an enterprise software or a set of enterprise software can generate to an enterprise, the upper limit is determined by the enterprise’s cognition of the field in which the system is responsible and its organizational form. The enterprise software itself can only determine the lower limit of this value. This is the reason why more and more SaaS companies tend to package services as "solutions" in their sales process, because tools alone are not good solutions to real problems.

For enterprise software like ERP , we can't get rid of the objective constraints of enterprise scale and management level. When the enterprise scale, complexity and management level rise to a new stage, enterprise software must help enterprises manage more and more complex enterprise business. It is not the product itself or the R&D team itself that ultimately determines the depth and breadth of the enterprise software of the enterprise, but the development level of the enterprise. Enterprise software should never get rid of reality and talk about the future and trend.

The ERP system is even more so. Whether it is procurement or self-development, before implementing ERP, it is necessary to fully realize the complexity of the enterprise's current procurement, distribution, and production operations, as well as the management level and organizational structure of the enterprise.

Taking my own project as an example, the system I am responsible for is the dealer ERP system from the perspective of dealer positioning.

In the actual promotion process, I found that the ratting of this system has been bad in the mom-and-pop stores. The reason is that the enterprise business of mom-and-pop dealers is very simple, there are few employees, and there is no clear division of labor; Less than 100 pieces in stock; The goods are durable goods, and there are only a dozen kinds, so the bill quantity is very small.

For such mom-and-pop dealers, the paper billing telephone communication they are accustomed to is enough to meet their current business, and their demand for business digitalization is very low, no matter how good the dealer ERP system we provide , it is also difficult for mom-and-pop dealers to feel the value enhancement brought by the system.

The evaluation of medium and large dealers has been good. The reason is that the size and business of the company do need to be managed by a system, with many employees, clear division of labor, large inventory, and some after-sales services. Due to the large amount of bills, it is impossible to manage effectively in the form of paper bills. The dealer ERP management system in charge of me helps dealers to manage their basic businesses such as purchasing, inventory and sales, and gradually deepens and expands the responsible modules, and the larger the dealer, the more looking forward to the module development in the future.

In addition to the above three points, the implementation of ERP actually needs the support of the top managers of the enterprise, and even the organizational structure of the enterprise and the production relationship of the enterprise need to be adjusted accordingly, in order to ensure the successful implementation of ERP.

3. ERP implementation route

In my project experience, I realize that ERP practice is a process of continuous improvement and is in line with the development of enterprises. I summarize the characteristics of ERP practice development route as follows:

  • First manage entity resources, then manage processes, and then manage capabilities (capabilities need to be abstracted first for capability management).
  • First support the business, then plan the business, then forecast the business.
  • Simplify the business first and then implement it in depth.

Taking manufacturing enterprises as an example, their ERP implementation will generally start from the four directions of procurement, warehouse, sales and finance, then increase production management and cost management, and guide enterprise activities with various plans, and then increase more in-depth production businesses such as workshop, production capacity and quality.

Of course, due to the difference of different companies, the implementation steps and content are different. After that, I will sort out the my own practice. 

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Recommendation of Related Axure Products 

The purchase, sales and inventory management system (ERP) is used to track and manage the whole process of material flow and capital flow in the production and operation of enterprises. From the receipt of orders, you can enter material purchase, entry, distribute, product entry, delivery, payment recovery, payment for raw materials, etc. Each step provides you with detailed and accurate data. Effectively assist enterprises to solve business problems in business management, distribution management, inventory management, implementation and monitoring of marketing plans, collection of statistical information, etc. 

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